System and Method for a Request for Cross in a Trade Matching Engine

ABSTRACT

Systems and methods are provided to fulfill customer trading orders in an illiquid two sided market. Request for cross functionality may be implemented in a trading environment using a trading engine for the matching of trades involving financial instruments. Request for cross functionally integrates the benefits of a dual bid-ask continuous trading market model with the price and quantity trade matching systems and methods.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.11/421,981, filed Jun. 2, 2006, and titled “System and Method for aRequest for Cross in a Trade Matching Engine, which application claimsthe benefit of U.S. provisional patent application Ser. No. 60/687,183,filed Jun. 3, 2005. The entire disclosures of application Ser. Nos.11/421,981 and 60/687,183 are incorporated by reference herein.

FIELD OF THE INVENTION

The invention relates to exchange trade matching systems and methods.More particularly, the invention relates to implementation of a requestfor cross functionality (RFC) into the trading environment.

DESCRIPTION OF THE RELATED ART

In existing exchanges, when a user wants to place an order in acontinuous two sided market, their bids or offers are submitted and anattempt to match the users order is conducted. The bids and offers areplaced in the book and are matched in real time on a price-time prioritybasis.

If there is no match or the customer does not want to take an existingbid/offer, as the price is not appropriate, in a conventional tradingsystem the user would enter the price they want for the product into anorder book and wait for a match to occur. However, in an illiquid marketthat order may rest in the order book for a long time and may nevermatch. Therefore, there is a need in the art for a more robust andefficient trade matching system and method.

SUMMARY

Aspects of the present invention overcome problems and limitations ofthe prior art by providing request for cross functionality. The requestfor cross functionality integrates the benefits of the dual bid-askcontinuous trading market model with the price and quantity tradematching systems and methods.

In an aspect of the invention, a request for quote may be submitted todetermine the liquidity of a particular instrument of interest to abroker and/or customer. In response to the request for quote, orders orquotes may be submitted by market participants. The broker may receivean initiating order from a customer. If no match can be found for thecustomer's order, the broker may contact various market makers in orderto request their best price for the other side of the customer's orderwithout revealing the full information about the quantity, price, andbuying/selling side of the product. Once a market maker has been found arequest for cross is initiated and the marketplace is informed that amatch will occur for the product. Additional market participants uponbeing informed that a match will occur may place new orders for theproduct within a specified time frame enabling the customer to completehis/her order.

Details of the invention are set forth in the accompanying drawings andthe description below. Other features and advantages of the inventionwill be apparent from the description, drawings, and claims.

BRIEF DESCRIPTION OF THE DRAWINGS

The present invention may take physical form in certain parts and steps,embodiments of which will be described in detail in the followingdescription and illustrated in the accompanying drawings that form apart hereof, wherein:

FIG. 1 illustrates a computer network system that may be used toimplement aspects of the present invention;

FIG. 2 illustrates a method of Requesting a Crossing of a trade in atrade matching engine in accordance with an aspect of the invention;

FIG. 3 further illustrates a method of Requesting a Crossing of a tradein a trade matching engine in accordance with an aspect of theinvention;

FIGS. 4-6 show the type of data that may be included in an order book inone illustrative example of the invention in accordance with an aspectof the invention;

FIGS. 7-11 show the type of data that may be included in an order bookin a second illustrative example of the invention in accordance with anaspect of the invention; and

FIGS. 12-16 show the type of data that may be included in an order bookin a third illustrative example of the invention in accordance with anaspect of the invention.

DETAILED DESCRIPTION

In order to clarify the description, definitions of several terms areprovided. The terms are exemplary and are not intended to be limiting ofthe scope of the invention.

-   -   1) Broker—An intermediary who provides a transaction service        between market makers and customers and/or between two        customers.    -   2) Broker Match Guarantee (BMG)—A trade engine guaranteed match        event occurring at the conclusion of the Pre-Cross period        between parties specified by the Broker.    -   2A) Better Price Match (BPM)—A trade engine guaranteed match        event occurring when the RFC price is better than the order book        prices at the time the RFC is received and the order book prices        are not through the RFC price at the conclusion of the Pre-Cross        period between parties specified by the Broker.    -   3) Call Around—Broker method of contacting market makers and        determining their willingness to commit to take the opposite        side of an Initiating Order.    -   4) Customer—A user who utilizes a Broker to transact orders on        their behalf    -   5) Initiating Order—Customer side order.    -   6) Market Maker—A user who provides liquidity in response to a        RFQ or RFC.    -   7) Pre-Cross Period—Time period related to a first of two RFC        match process cycles.    -   8) Remaining1—The residual quantity remaining after the BMG        match event has completed.    -   9) Request for Cross (RFC)—A market alert mechanism that        indicates that a match will occur for an instrument.    -   10) Request for Quote (RFQ)—A market alert mechanism initiated        by a Broker that asks the marketplace to post liquidity for an        instrument.    -   11) Cross Period—Time period related to the second of two RFC        match process cycles.

Aspects of the present invention are preferably implemented with or usedin conjunction with computer devices and computer networks. An exemplarytrading network environment for implementing trading systems and methodsis shown in FIG. 1. An exchange computer system 100 receives orders andtransmits market data related to orders and trades to users. Exchangecomputer system 100 may be implemented with one or more mainframe,desktop or other computers. A user database 102 includes informationidentifying traders and other users of exchange computer system 100.Data may include user names and passwords.

An account data module 104 may process account information that may beused during trades. A match engine module or trade matching engine 106is included to match bid and offer prices. Match engine module 106 maybe implemented with software that executes one or more algorithms formatching bids and offers. A trade database 108 may be included to storeinformation identifying trades and descriptions of trades. Inparticular, a trade database may store information identifying the timethat a trade took place and the contract price. An order books module110 may be included to compute or otherwise determine current bid andoffer prices. A market data module 112 may be included to collect marketdata and prepare the data for transmission to users. A risk managementmodule 134 may be included to compute and determine a user's riskutilization in relation to the user's defined risk thresholds. An orderprocessor module 136 may be included to decompose delta based and bulkorder types for processing by order book module 110 and trade matchingengine 106.

The trading network environment shown in FIG. 1 includes computerdevices 114, 116, 118, 120, and 122. Each computer device includes acentral processor that controls the overall operation of the computerand a system bus that connects the central processor to one or moreconventional components, such as a network card or modem. Each computerdevice may also include a variety of interface units and drives forreading and writing data or files. Depending on the type of computerdevice, a user can interact with the computer with a keyboard, pointingdevice, microphone, pen device or other input device.

Computer device 114 is shown directly connected to exchange computersystem 100. Exchange computer system 100 and computer device 114 may beconnected via a T1 line, a common local area network (LAN) or othermechanism for connecting computer devices. Computer device 114 is shownconnected to a radio 132. The user of radio 132 may be a trader orexchange employee. The radio user may transmit orders or otherinformation to a user of computer device 114. The user of computerdevice 114 may then transmit the trade or other information to exchangecomputer system 100.

Computer devices 116 and 118 are coupled to a LAN 124. LAN 124 may haveone or more of the well-known LAN topologies and may use a variety ofdifferent protocols, such as Ethernet. Computers 116 and 118 maycommunicate with each other and other computers and devices connected toLAN 124. Computers and other devices may be connected to LAN 124 viatwisted pair wires, coaxial cable, fiber optics or other media.Alternatively, a wireless personal digital assistant device (PDA) 122may communicate with LAN 124 or the Internet 126 via radio waves. PDA122 may also communicate with exchange computer system 100 via aconventional wireless hub 128. As used herein, a PDA includes mobiletelephones and other wireless devices that communicate with a networkvia radio waves.

FIG. 1 also shows LAN 124 connected to the Internet 126. LAN 124 mayinclude a router to connect LAN 124 to the Internet 126. Computer device120 is shown connected directly to the Internet 126. The connection maybe via a modem, DSL line, satellite dish or any other device forconnecting a computer device to the Internet.

One or more market makers 130 may maintain a market by providingconstant bid and offer prices for a derivative or security to exchangecomputer system 100. Exchange computer system 100 may also exchangeinformation with other trade engines, such as trade engine 138. Oneskilled in the art will appreciate that numerous additional computersand systems may be coupled to exchange computer system 100. Suchcomputers and systems may include clearing, regulatory and fee systems.

The operations of computer devices and systems shown in FIG. 1 may becontrolled by computer-executable instructions stored oncomputer-readable medium. For example, computer device 116 may includecomputer-executable instructions for receiving order information from auser and transmitting that order information to exchange computer system100. In another example, computer device 118 may includecomputer-executable instructions for receiving market data from exchangecomputer system 100 and displaying that information to a user.

Of course, numerous additional servers, computers, handheld devices,personal digital assistants, telephones and other devices may also beconnected to exchange computer system 100. Moreover, one skilled in theart will appreciate that the topology shown in FIG. 1 is merely anexample and that the components shown in FIG. 1 may be connected bynumerous alternative topologies.

In an aspect of the invention, a user wants to place an order in acontinuous two sided market (bids and offers are in the book and matchedin real time on a price-time priority basis). However, the user does notwant to take an existing bid/offer that is resting in the book, as theprice, for example, may not be satisfactory to the user. Moreover, theprices may or may not be posted for a given instrument such as theEurodollar option or Eurodollar future.

Referring to FIGS. 2 and 3, a method of requesting a cross in a tradematching engine 106 is illustrated in accordance with an aspect of theinvention. In a first step 202, a customer may contact a broker toexpress an interest for a various trade.

In response to the customer inquiry, the broker in a step 204 may submita request for quote (RFQ). The RFQ may ask the marketplace to postliquidity for a particular instrument of interest to the broker andcustomer. In response to the RFQ, orders or quotes may be submitted byother market participants as illustrated in step 206. In step 208, thebroker may receive an initiating order from a customer. The initiatingorder may include the price and quantity requested by the customer.

In step 210, the price and quantity requested by the customer may becompared to orders that have been entered into an order book. If theprice and quantity in the order book fully meet the customer'sinitiating order, then in step 212 the order book's bid or offer ismanually swept by the broker to the extent of the initiating order. Asthe customer's order has been completed the process ends at step 213.Other non-RFC related matching may occur on the order book during theentire RFC process.

However, if the price and quantity entered in the order book do notfully meet the customer's initiating order then, the broker may callaround in step 214 to find an opposite side to the customer's initiatingorder. For example, a customer's broker, in order to find a match, maycontact various market makers (MMs) and request their best price for theother side of the customer's order without revealing the full orderinformation (maybe only the quantity and the type of product).Communications between broker and customer may be accomplished throughvarious media such as e-mail, instant messaging, telephone, and/or othercommunication devices or methods. Those skilled in the art will realizethat other forms of communication may be utilized in order to find anopposite side to the customer's initiating order.

If one or more market makers agree to take the other side of the orderat the price and quantity desired by the customer, the following stepsmay occur. In step 216, the broker initiates a two sided request forcross (RFC) message. The two sided RFC message may include additionalinformation such as account numbers for the buy side and the sell side.Other information such as order type instructions to be applied afterthe RFC has expired may also be included. Such instructions may includeFAK (Fill and Kill) and/or limit session instructions. In addition, thematching engine or match engine module 106 may terminate the RFC request(step 213), if at any time either side of the order is fully matched.For example, the termination of the RFC may occur when the order isfully matched during such times as at the end of the Pre-Cross period,anytime during the Cross period, or anytime at the end of the Crossperiod.

When the trade matching engine or match engine module 106 accepts theRFC, then in step 218 a Pre-Cross period begins. The two sided RFCmessage may be sent out on the market data feed indicating to all marketparticipants that a request for cross (RFC) in a particular product hasoccurred. The price and quantity may not be revealed to the marketparticipants, only the existence of the RFC. The informed marketparticipants may know that that the RFC was issued. This may allowadditional market participants to submit orders to the order book. Thetrade matching engine 106 may inform the trading community of the RFC atmany different stages of the RFC process such as when the RFC isaccepted by the trade matching engine 106 or when a particular timeperiod has expired. For instance, trade matching engine 106 maybroadcast messages to market participants after a first time period anda second time period have expired.

In step 220, orders and quotes may be submitted in response to the RFCduring the Pre-Cross period. The Pre-Cross period may include a timeperiod such as 15 seconds before proceeding to allow new orders to besent to the system. Those skilled in the art will realize that the timeperiod of 15 seconds is exemplary and that a longer or shorter timeperiod may be utilized. In addition, the time period may be differentfor various different products such as Eurodollar options and Eurodollarfutures. In step 222 of FIG. 3, the Pre-Cross period expires after theselected time period. A message may be generated to acknowledge theexpiration of the Pre-Cross period. A flag may also be utilized toindicate the Pre-Cross period expiration.

Next, in step 224 price and quantity may be compared to orders in theorder book to see if price and quantity match either side of the RFC. Ifprice and quantity match either side of the RFC, then orders may beautomatically matched by the trade matching engine (106) to the extentof either of the RFC's order sides. The use of regular match algorithmsby the trade matching engine (106) may apply.

In step 227, the trade matching engine 106 may check to determinewhether either side of the order was completely filled. If either sideof the RFC order was completely filled then the RFC may be ended (step213) and the remaining side of the order may be subject to FAK orlimit/session instructions as dictated in the original RFC submission.Moreover, market data and clearing messages may be generated in step228. If only a portion of either side of the RFC order was matched thenthe remaining portion advances to step 234.

If price and quantity do not match either side of the RFC (step 224),then in step 223 it may be determined if a Better Price Match (BPM)allocation will be applied. A BPM allocation may occur if the RFC priceis better than the existing order book bid and ask prices at the timethe RFC is received by the matching engine (i.e. the beginning of thePre-Cross period) and the order book prices are not through the RFCprice at the conclusion of the Pre-Cross period. The Better Price Match(BPM) allocation occurs for twenty-five percent (step 225) of the RFCorder quantity. Those skilled in the art will realize that theallocation percentage is exemplary and may be higher or lower in variousdifferent aspects of the invention. In addition, in an aspect of theinvention, the BPM allocation may not be changed during a particulartrading session. In other aspects of the invention, the BPM allocationmay be defined to two decimal places, may be rounded down, and may notbe greater than 100 percent. Market data and clearing messages may begenerated.

Next, in step 234, a Broker Match Guarantee (BMG) allocation may occurfor sixty (60) percent of the remainder of the order (customer orderamount less matched above). Those skilled in the art will realize thatthe allocation percentage is exemplary and may be higher or lower invarious different aspects of the invention. In addition, in an aspect ofthe invention, the BMG may not be changed during a particular tradingsession. In other aspects of the invention, the BMG may be defined totwo decimal places, may be rounded down, and may not be greater than 100percent. The market maker allocation may then be matched against thecustomer's order. Even if there are no resting orders to be matched witheither side of the RFC, the BMG may still be applied to the RFC. Theopposing sides of the BMG's allocation percentage may be the customerside (initiator side) and the market maker side.

In step 236, the customer's order and market maker's order for theresidual amount may be automatically displayed in the order book forboth bid and offer sides (Remaining1). The Remaining1 order sides may bedisplayed for a maximum of a Cross period. Both sides of the orders(customers or market makers) may be available for immediate matchingfrom outside orders during the Cross period. For example, Cross periodmay be a time period such as 15 seconds. Those skilled in the art willrealize that that time period of 15 seconds is exemplary and that alonger or shorter time period may be utilized. The use of regular matchalgorithms by trade matching engine 106 may apply. A message may begenerated to acknowledge the expiration of the Cross period. A flag mayalso be utilized to indicate Cross period expiration.

In step 239, the trade matching engine 106 may determine if one side ofthe RFC sides has been completely filled. If one side of the RFC sideshas been completely filled then the RFC may be terminated at step 213.Market data and clearing messages may be generated. However, if bothsides of the RFC remain then the process advances to step 240.

In step 240, if Cross period time expires and the Remaining1 quantitiesare equal, then Remaining1 order sides may be automatically matched ontrade matching engine 106 with one another (step 242). Moreover, in step228 market data and clearing messages may be generated. However, ifCross period time expires and the Remaining1 quantities are unequal(step 244), then any Remaining1 equal quantities may be automaticallymatched by the trade matching engine 106 (step 248) and any residualRemaining1 order quantity may be subject to FAK or limit/sessioninstructions (step 236) as dictated in the original RFC submission. Inanother aspect of the invention, a RFC may only be valid for the marketsession in which they were entered. If an unscheduled market pause orclose occurs, the RFC may be terminated with the session market changeand may not transfer to the next market cycle open. Moreover, in step228, market data and clearing messages may be generated.

A RFC may be cancelled at any time during the above process. A minimumRFC order may also be established for various products. Orders alreadymatched may be left matched and no subsequent steps may be executed.Also, during the Pre-Cross period other trades based on normal ordersmay match at any price (above or below the RFC price). Furthermore, theRFC orders may be put last in the time order for price-time prioritymatching purposes. That is an order entered later in time may matchagainst a RFC order before the other side of the RFC order.

The following examples are meant to help further illustrate variousaspects of the invention. For instance, listed below are illustrativeexamples of when a Best Price Match (BPM) allocation may occur. Thoseskilled in the art will realize that the following scenarios are meantto provide illustrative examples of BPM allocation in variousembodiments and are not meant to limiting. As stated above, if the RFCprice is better than the existing order book bid and offer prices at thetime the RFC is received by the matching engine (i.e. the beginning ofthe Pre-Cross period) and the order book prices are not through the RFCprice at the conclusion of the Pre-Cross period, then a Better PriceMatch (BPM) allocation occurs. In an illustrative example, the orderbook may contain a bid price of $4.00 and an offer price of $6.00. A RFCmay be entered with a price of $5.00 for a quantity of 5000 contracts.At the end of the Pre-Cross period, the market may have adjusted to thepoint where the order book contains a bid price of $5.00 and an offerprice of $6.00. A BPM allocation is applied in the above exemplaryembodiment as the RFC price is better than the order book bid and offerprices upon receipt by the trade matching engine 106 or exchangecomputer system 100, and the order book bid or offers prices are notthrough the RFC price at the conclusion of the Pre-Cross period. Afterthe BPM allocation, the trade matching engine 106 or exchange computersystem 100 may match the market's $5.00 bid against the RFC offer. Tradematching engine 106 or exchange computer system 100 may apply the BrokerMatch Guarantee (BMG) percentage if there is remaining RFC quantity onboth sides.

In another illustrative example, the order book may contain a bid priceof $5.00 and an offer price of $6.00. A RFC may be entered for a priceof $5.00 with a quantity of 5000 contracts. At the end of the Pre-Crossperiod, the market may not change and the order book may still include abid price of $5.00 and an offer price of $6.00. Because the RFC price isnot better than the markets bid and offer price at the time of receiptby trade matching engine 106, BPM allocation is not applied. The tradematching engine 106 or exchange computer system 100 may match themarket's $5.00 bid against the RFC offer. Trade matching engine 106 orexchange computer system 100 may apply BMG if there is remaining RFCquantity on both sides.

In a third illustrative example, the order book may contain a bid priceof $4.00 and an offer price of $6.00. A RFC may be entered with a priceof $5.00 for a quantity of 5000 contracts. At the end of the Pre-Crossperiod, the market may include a bid price of $3.00 and an offer priceof $4.00. In this example, the order book offer price at $4.00 isthrough the RFC bid price of $5.00. Therefore, BPM allocation is notapplied. The market's $4.00 offer may be matched against the RFC bid andthe RFC bid receives the price improvement. Trade matching engine 106 orexchange computer system 100 may apply BMG if there is remaining RFCquantity on both sides.

In a fourth illustrative example, the order book may contain a bid priceof $5.00 and an offer price of $6.00. A RFC may be entered with a priceof $5.00 for a quantity of 5000 contracts. At the end of the Pre-Crossperiod, the market may include a bid price of $4.00 and an offer priceof $6.00. Because the RFC price is not better than the bid and offerprices at the time the RFC was received into the order book, BPMallocation is not applied.

In a fifth illustrative example, the order book may contain a bid priceof $4.00 and an offer price of $6.00. A RFC may be entered with price of$5.00 for a quantity of 5000 contracts. At the end of the Pre-Crossperiod, the market may include a bid price of $4.00 and an offer priceof $6.00. Because the RFC price is better than the order book priceswhen the RFC was received by the trading system and the order bookprices are not through the RFC price at the end of the Pre-Cross period,BPM allocation is applied.

In a sixth illustrative example, the order book may not contain a bid oran offer. A RFC may be entered with price of $5.00 for a quantity of5000 contracts. At the end of the Pre-Cross period, the market may havenot expressed any interest. Because the RFC price is a better price (andonly price), BPM allocation is applied at the end of the Pre-Crossperiod.

The following examples are described in conjunction with FIGS. 2 and 3.In a first exemplary scenario, a RFC is executed at a price between thebid and offer price found in an order book. In particular, FIG. 4illustrates entries into an order book 401. The order book 401 may belayout such that bids 402 are placed in the left hand side of order book401 and offers 404 are placed on the right hand side of order book 401.As described above in FIGS. 2 and 3, a customer may contact a broker toexpress an interest for various trades in step 202. In response to thecustomer inquiry, the broker in a step 204 may submit a request forquote (RFQ). The RFQ may ask marketplace participants to post theliquidity for a particular instrument of interest to the broker andcustomer. In response to the RFQ, orders or quotes may be submitted bymarket participants as illustrated in step 206. For example in responseto a broker's RFQ, a response such as a bid price of $2.00 dollars (405)for a quantity of 2000 contracts (406) and an offer price of $3.00dollars (407) for a quantity of 5000 contracts (408) may be received inresponse to the RFQ for a particular instrument These price andquantities may be placed in order book 401 as illustrated in FIG. 4.

In step 208, the broker may receive an initiating order from a customer.The initiating order may include the price and quantity requested by thecustomer. For example, the broker may receive an initiating order tosell 10,000 contracts at a price of $2.50 dollars per contract.

Next in step 210, a price and quantity requested by the customer may becompared to orders that have been entered into order book 401. If theprice and quantity in the order book 401 fully meet the customer'sinitiating order, then in step 212 the order book's bid or offer may bemanually swept by the broker to the extent of the initiating order. Asthe customer's order has been completed the process ends at step 213.

However, if the price and quantity entered in the order book 401 do notfully meet the customer's initiating order then, the broker may callaround in step 214 to find an opposite side to customer's initiatingorder. For example, the broker may find a customer wanting to buy 10,000contracts at a price of $2.50 per contract. In order to find a match,the broker may contact various market makers (MMs) and request theirbest price for the other side of the customer's order without revealingthe full order information (maybe only the quantity and the type ofproduct). Communications between broker and customer may be accomplishedthrough various media such as e-mail, instant messaging, telephone,and/or other communication devices or methods. Those skilled in the artwill realize that other forms of communication may be utilized in orderto find an opposite side to the customer's initiating order. Based onthis order, the broker submits the RFC at $2.50 per contract. Therequest as described in step 216 may be in the form of a two sidedrequest for cross (RFC) message initiated by the broker.

The market trade matching engine 106 may accept the RFC and in step 218a Pre-Cross period starts. The two sided RFC message may be sent out onthe market data feed indicating to all market participants that arequest for cross (RFC) in a particular product has occurred. The priceand quantity may not be revealed to the market participants, only theexistence of the RFC. The informed market participants may know thatthat the RFC was issued. This may allow additional market participantsto submit new orders to the order book 401.

In step 220, orders and quotes may be submitted in response to the RFCduring the Pre-Cross period. The Pre-Cross period may include a timeperiod such as 15 seconds before proceeding to allow new orders to besent to the system. After expiration of the Pre-Cross period, themarket's response may still be a bid price of $2.00 dollars (405) for aquantity of 2000 contracts (406) and an offer price of $3.00 dollars(407) for a quantity of 5000 contracts (408) as shown in FIG. 4.

In step 222 of FIG. 3, the Pre-Cross period expires after the selectedtime period. Price and quantity may be compared to orders in the orderbook 401 in step 224 to determine if price and quantity match eitherside of the RFC. In this example, the price and the quantities do notmatch either side of the RFC.

Next, in step 223, if the RFC price is better than the existing orderbook bid and ask prices at the time the RFC is received by the matchingengine (i.e. the beginning of the Pre-Cross period) and the order bookprices are not through the RFC price at the conclusion of the Pre-Crossperiod, then a Better Price Match (BPM) allocation occurs fortwenty-five percent (step 225) of the RFC order quantity. Those skilledin the art will realize that the allocation percentage is exemplary andmay be higher or lower in various different aspects of the invention.Therefore, as the criterion in step 223 has been satisfied in step 225,a Better Price match occurs for twenty-five percent of the order. Thoseskilled in the art will realize that the allocation percentage isexemplary and may be higher or lower in various different aspects of theinvention. In this example, twenty-five (25) percent of the 10,000contracts is equivalent to 2,500 contracts at a price of $2.50 percontract.

Next, in step 234, a Broker Match Guarantee (BMG) allocation occurs forsixty (60) percent of the remainder of the order (customer order amountless matched above). Those skilled in the art will realize that theallocation percentage is exemplary and may be higher or lower in variousdifferent aspects of the invention. In this example, sixty (60) percentof the remaining 7,500 contracts is equivalent to 4,500 contracts at aprice of $2.50 per contract.

In step 236, the customer's order and market maker's order for theresidual amount may be automatically displayed in the order book forboth bid and offer sides (Remaining1). The Remaining1 order sides may bedisplayed for a maximum of Cross period. Both sides of the orders(customers or market makers) may be available for immediate matchingfrom outside orders during the Cross period. For example, Cross periodmay be a time period such as 15 seconds. Those skilled in the art willrealize that the 15 second time period is exemplary and that a longer orshorter time period may be utilized. The order book 401 may appear asillustrated in FIG. 5 wherein the Remaining1 3000 contracts (412) for aprice of $2.50 (414) per contract may be displayed. During the Crossperiod, the market may have the opportunity to buy and/or sell theremaining contracts. The use of regular match algorithms by the tradematching engine 106 may apply.

Next, in step 239 the trade matching engine 106 may determine if oneside of the RFC sides has been completely filled. If one side of the RFCsides has been completely filled then the RFC may be terminated at step213. Market data and clearing messages may be generated. However, ifboth sides of the RFC remain then the process advances to step 240. Inthis exemplary example, both sides of the RFC remain.

Next in step 240 and FIG. 6, if Cross period time expires and theRemaining1 quantities are equal, and then Remaining1 order sides mayautomatically match on the trade matching engine 106 with one another(step 242). For example, the trade matching engine 106 crosses the RFCbalance of 3000 contracts (412) at a price of $2.50 (414) per contract.Moreover, in step 228 market data and clearing messages may begenerated. Because Cross period time has expired and Remaining1quantities are unequal (step 244), the residual Remaining1 quantities of2000 contracts (406) at $2.00 (405) and 5000 contracts (408) at $3.00(407) are subject to FAK or limit/session instructions as dictated inthe original RFC submission.

In a second exemplary scenario, an RFC may partially match the best bidin an order book. In particular, FIG. 7 illustrates entries into anorder book 701. The order book 701 may be layout such that bids 702 areplaced in the left hand side of order book 701 and offers 704 are placedon the right hand side of order book 701. As described above in FIGS. 2and 3, a customer may contact a broker to express an interest forvarious trades in step 202. In response to the customer inquiry, thebroker in a step 204 may submit a request for quote (RFQ). The RFQ mayask marketplace participants to post the liquidity for a particularinstrument of interest to the broker and customer. In response to theRFQ, orders or quotes may be submitted by market participants asillustrated in step 206. For example in response to a broker's RFQ, aresponse such as a bid price of $2.00 dollars (705) for a quantity of2000 contracts (706) and an offer price of $3.00 dollars (707) for aquantity of 5000 contracts (708) may be received in response to the RFQfor a particular instrument These prices and quantities may be placed inorder book 701 as illustrated in FIG. 7.

In step 208, the broker may receive an initiating order from a customer.The initiating order may include the price and quantity requested by thecustomer. For example, the broker may receive an initiating order tosell 10,000 contracts at a price of $2.00 dollars per contract.

Next in step 210, a price and quantity requested by the customer may becompared to orders that have been entered into order book 701. If theprice and quantity in the order book 701 fully meet the customer'sinitiating order, then in step 212 the order book's bid or offer may bemanually swept by the broker to the extent of the initiating order. Asthe customer's order has been completed, the process ends at step 213.

However, if the price and quantity entered in order book 701 do notfully meet the customer's initiating order then, the broker may callaround in step 214 to find an opposite side to customer's initiatingorder. For example, the broker may find a market maker wanting to buy10,000 contracts at a price of $2.00 per contract. Based on this orderthe broker requests to cross the trade (RFC) at $2.00 per contract. Therequest as described in step 216 may be in the form of a two sidedrequest for cross (RFC) message initiated by the broker.

The trade matching engine 106 may accept the RFC and in step 218 aPre-Cross period starts. The two sided RFC message may be sent out onthe market data feed indicating to all market participants that arequest for cross (RFC) in a particular product has occurred. The priceand quantity may not be revealed to the market participants, only theexistence of the RFC. The informed market participants may know thatthat the RFC was issued. This may allow additional market participantsto submit new orders to the order book 701.

In step 220, orders and quotes may be submitted in response to the RFCduring the Pre-Cross period. The Pre-Cross period may include a timeperiod such as 15 seconds before proceeding to allow new orders to besent to the system. In step 222 of FIG. 3, Pre-Cross period expiresafter the selected time period. After expiration of the Pre-Crossperiod, the market's response may be as shown in FIG. 8. In FIG. 8, abid price of $2.00 dollars (712) for a quantity of 2500 contracts (714)and an offer price of $3.00 dollars (707) for a quantity of 5000contracts (708) may be received from the marketplace.

Next, in step 224 price and quantity may be compared to orders in orderbook 701 to see if price and quantity match either side of the RFC. Inthis example, step 224 is satisfied because the new bid order of $2.00dollars (712) for a quantity of 2500 contracts (714) matches the RFCoffer price but the quantity is insufficient. The engine automaticallyfills the order for 2500 contracts (714) at $2.00 dollars (712) percontract. FIG. 9 illustrates order book 701 after the engine fills theorder.

In step 227, the trade matching engine 106 may check to determinewhether either side of the order was completely filled. If either sideof the RFC order was completely filled then the RFC may be ended (step213) and the remaining side of the order may be subject to FAK orlimit/session instructions as dictated in the original RFC submission.Moreover, market data and clearing messages may be generated in step228. If only a portion of either side of the RFC order was matched thenthe remaining portion advances to step 234 to determine if a BrokerMatch Guarantee allocation may be applied.

If price and quantity do not match either side of the RFC (step 224),then in step 223, it may be determined if a Better Price Match (BPM)allocation will be applied. In this exemplary embodiment, a BPMallocation does not occur.

Next, in step 234, a Broker Match Guarantee (BMG) allocation occurs forsixty (60) percent of the remainder of the order (customer order amountless matched above). Those skilled in the art will realize that theallocation percentage is exemplary and may be higher or lower in variousdifferent aspects of the invention. In this example, sixty (60) percentof the remaining 7,500 contracts is equivalent to 4,500 contracts at aprice of $2.00 per contract. In step 228, market data and clearingmessages may be generated for the guaranteed BMG allocation percentage.

In step 236, the customer's order and market maker's order for theresidual amount may be automatically displayed in the order book 701 forboth bid and offer sides (Remaining1). The Remaining1 order sides may bedisplayed for a maximum of Cross period. Both sides of the orders(customers or market makers) may be available for immediate matchingfrom outside orders during the Cross period. For example, Cross periodmay be a time period such as 15 seconds. Those skilled in the art willrealize that that time period of 15 seconds is exemplary and that alonger or shorter time period may be utilized. The order book 701 mayappear as illustrated in FIG. 10 wherein the Remaining1 5500 bid balancecontracts (722) for a price of $2.00 (724) per contract and the 3000offers contracts (726) for a price of $2.00 (728) may be displayed.During the Cross period, the market may have the opportunity to buyand/or sell the remaining contracts. The use of regular match algorithmsby the trade matching engine 106 may apply. In the example, the marketdoes not buy or sell at a price of $2.00 per contract on either side ofthe market.

Next, in step 239 the trade matching engine 106 may determine if oneside of the RFC sides has been completely filled. If one side of the RFCsides has been completely filled then the RFC may be terminated at step213. Market data and clearing messages may be generated. However, ifboth sides of the RFC remain then the process advances to step 240. Inthis exemplary example, both sides of the RFC remain.

Next in step 240 and FIG. 6, if Cross period time expires and theRemaining1 quantities are equal, and then Remaining1 order sides mayautomatically match on the trade matching engine 106 with one another.For example, the engine crosses the RFC balance of 3000 contracts (726)at a price of $2.00 (728) per contract. Moreover, in step 228 marketdata and clearing messages may be generated. Because Cross period timehas expired and Remaining1 quantities are unequal (step 244), theresidual Remaining1 quantities of 2500 contracts (not shown) at $2.00and 5000 contracts (708) at $3.00 (707) are subject to FAK orlimit/session instructions as dictated in the original RFC submission.In this example, the remaining 2,500 contracts on the bid are cancelledas the broker gave FAK instructions. The order book 701 after thetransactions may still show the initial 5,000 offer contracts (708) at$3.00 (707) per contract as illustrated in FIG. 11.

In a third exemplary scenario, one side of an RFC may get a better fillprice due to an intervening order price. In particular, FIG. 12illustrates entries into an order book 1201. The order book 1201 may belayout such that bids 1202 are placed in the left hand side of orderbook 1201 and offers 1204 are placed on the right hand side of orderbook 1201. As described above in FIGS. 2 and 3, a customer may contact abroker to express an interest for various trades in step 202. Inresponse to the customer inquiry, the broker in step 204 may submit arequest for quote (RFQ). The RFQ may ask marketplace participants topost the liquidity for a particular instrument of interest to the brokerand customer. In response to the RFQ, orders or quotes may be submittedby market participants as illustrated in step 206. For example inresponse to a broker's RFQ, a response such as a bid price of $2.00dollars (1205) for a quantity of 2000 contracts (1206) and an offerprice of $2.50 dollars (1207) for a quantity of 5000 contracts (1208)may be received in response to the RFQ for a particular instrument Theseprices and quantities may be placed in order book 1201 as illustrated inFIG. 12.

In step 208, the broker may receive an initiating order from a customer.The initiating order may include price and quantity requested by thecustomer. For example, the broker may receive an initiating order tosell 10,000 contracts at a price of $2.00 dollars per contract.

Next in step 210, a price and quantity requested by the customer may becompared to orders that have been entered into order book 1201. If theprice and quantity in the order book 1201 fully meet the customer'sinitiating order, then in step 212 the order book's bid or offer may bemanually swept by the broker to the extent of the initiating order. Asthe customer's order has been completed the process ends at step 213.

However, if the price and quantity entered in the order book 1201 do notfully meet the customer's initiating order then, the broker may callaround in step 214 to find an opposite side to customer's initiatingorder. For example, the broker may find a customer wanting to buy 10,000contracts at a price of $2.00 per contract. Based on this order, thebroker requests to cross the trade (RFC) at $2.00 per contract. Therequest as described in step 216 may be in the form of a two sidedrequest for cross (RFC) message initiated by the broker.

The trade matching engine 106 may accept the RFC and in step 218 aPre-Cross period starts. The two sided RFC message may be sent out onthe market data feed indicating to all market participants that arequest for cross (RFC) in a particular product has occurred. The priceand quantity may not be revealed to the market participants, only theexistence of the RFC. The informed market participants may know thatthat the RFC was issued. This may allow additional market participantsto submit new orders to the order book 1201.

In step 220, orders and quotes may be submitted in response to the RFCduring the Pre-Cross period. The Pre-Cross period may include a timeperiod such as 15 seconds before proceeding to allow new orders to besent to the system. In step 222 of FIG. 3, Pre-Cross period expiresafter the selected time period. After expiration of the Pre-Crossperiod, the market's response may be as shown in FIG. 13. In FIG. 13, abid price of $1.00 dollar (1312) for a quantity of 20,000 (1314)contracts and an offer price of $1.50 dollars (1316) for a quantity of8000 contracts (1318) may be received from the marketplace.

In step 222 of FIG. 3, the Pre-Cross period expires after the selectedtime period. In step 224, price and quantity may be compared to ordersin order book 1201 to determine if price and quantity match either sideof the RFC. In this example, trade matching engine 106 may match 8,000contracts on the RFC market maker buy side. This matching may result ina price of $1.50 per contract which means that the RFC market maker buyside gets a better price for the 8,000 contracts. In other words, themarket maker intended to buy at $2.00 per contract but the order wasfiled at $1.50 per contract.

In step 227, the trade matching engine 106 may check to determinewhether either side of the order was completely filled. If either sideof the RFC order was completely filled then the RFC may be ended (step213) and the remaining side of the order may be subject to FAK orlimit/session instructions as dictated in the original RFC submission.Moreover, market data and clearing messages may be generated in step228. If only a portion of either side of the RFC order was matched thenthe remaining portion advances to step 234.

Because there was insufficient quantity to meet one side of the RFC, theBroker Guarantee Match (BMG) allocation occurs in step 234. The BMG mayoccur for sixty (60) percent of the remainder of the order (customerorder amount less matched above). Those skilled in the art will realizethat the allocation percentage is exemplary and may be higher or lowerin various different aspects of the invention.

In this example, sixty (60) percent of the remaining 2,000 contracts isequivalent to 1,200 contracts at a price of $2.00 per contract. Afterthe BMG, the market maker may have 800 contracts (1402) at $2.00 (1403)left and the RFC initiator side has 8,800 contracts (1404) at $2.00(1406) remaining as illustrated in FIG. 14. In step 228, market data andclearing messages may be generated for the guaranteed BMG allocationpercentage.

Next, in step 236, the user's order or market maker's order for theresidual amount may be automatically displayed in the order book 1201for both bid and offer sides (Remaining1). The Remaining1 order sidesmay be displayed for a maximum of Cross period. For example, Crossperiod may be a time period such as 15 seconds. Those skilled in the artwill realize that that time period of 15 seconds is exemplary and that alonger or shorter time period may be utilized.

During the Cross period, the market may have the opportunity to buyand/or sell the remaining contracts. In this example, the offer ismanually matched by another user for 5,000 contracts as shown in FIG.15. In FIG. 15, the offer side 1204 has only 3,800 contracts (1502) at aprice of $2.00 (1504) per contract. The use of regular match algorithmsby trade matching engine 106 may apply. Moreover, in step 228, marketdata and clearing messages may be generated. In the example, the marketdoes not buy or sell at a price of $2.00 per contract on either side ofthe market.

Next, in step 239 the trade matching engine 106 may determine if oneside of the RFC sides has been completely filled. If one side of the RFCsides has been completely filled then the RFC may be terminated at step213. Market data and clearing messages may be generated. However, ifboth sides of the RFC remain then the process advances to step 240. Inthis exemplary example, both sides of the RFC remain.

Next in step 240 and FIG. 14, if Cross period time expires and theRemaining1 quantities are equal then Remaining1 order sides mayautomatically match on the trade matching engine with one another. Inthis third example, the Remaining1 quantities are not equal so the tradematching engine 106 moves to step 244. When the Cross period timeexpires, 800 contracts (1402) at a price of $2.00 (1403) are matched bythe engine. The remaining 3000 contracts (1602) at a price of $2.00(1604) per contract remains on order book 1201 as the order werespecified with limit/session orders.

The present invention has been described herein with reference tospecific exemplary embodiments thereof. It will be apparent to thoseskilled in the art that a person understanding this invention mayconceive of changes or other embodiments or variations, which utilizethe principles of this invention without departing from the broaderspirit and scope of the invention as set forth in the appended exemplaryaspects of the invention. All are considered within the sphere, spirit,and scope of the invention.

1. A method, comprising: (a) receiving a request for cross order at a computer system, the request for cross order comprising a first order associated with a first party and a second order associated with a second party, wherein the first and second orders correspond to opposite trading positions; (b) performing, by the computer system, a first determination of whether a portion of the first order is to be matched against a portion of the second order; and (c) performing, by the computer system and after (b), a second determination of whether a portion of the first order is to be matched against a portion of the second order.
 2. The method of claim 1, further comprising: (a1) matching, after (a) and before (b), by the computer system, and against a first portion of the first order, a third order associated with a party other than the second party, wherein the first portion is less than all of the first order, and wherein a remaining portion of the first order remains after matching with the third order; (b1) matching, after (b) and before (c), and by the computer system, less than all of the remaining portion of the first order against a portion of the second order, wherein a residual portion of the first order and a residual portion of the second order remain after the matching of less than all of the remaining portion of the first order against a portion of the second order; and (b2) matching, after (b1) and before (c), and by the computer system, a fourth order against the residual portion of the first order or against the residual portion of the second order.
 3. The method of claim 2, further comprising: (c1) matching, after (c), and by the computer system, a part of the first order against a part of the second order.
 4. The method of claim 3, wherein the request for cross order received in (a) comprises additional instructions, and further comprising: (c2) processing, by the computer system, and in accordance with the additional instructions, a remainder of the first or second order remaining after (c1).
 5. The method of claim 4, wherein the additional instructions include at least one of fill and kill instructions or limit session instructions.
 6. The method of claim 1 wherein the first and second orders are orders for a first financial product, and further comprising: (a1) prompting, after (a) and before (b), for submissions of orders during a first pre-cross period by parties other than the first or second party; (d) receiving a second request for cross order at a computer system, the second request for cross order comprising a third order and a fourth order, wherein the third and fourth orders correspond to opposite trading positions for a second financial product, and wherein the second financial product is different from the first financial product; (d1) prompting, after (d), for submissions of orders during a second pre-cross period by parties other than parties associated with the third and fourth orders, wherein the second pre-cross period is of different duration than the first pre-cross period; (e) performing, by the computer system and after (d1), a first determination of whether a portion of the third order is to be matched against a portion of the fourth order; and (f) performing, by the computer system and after (e), a second determination of whether a portion of the third order is to be matched against a portion of the fourth order.
 7. A non-transitory computer readable medium storing computer-executable instructions for performing operations comprising: (a) receiving a request for cross order, the request for cross order comprising a first order associated with a first party and a second order associated with a second party, wherein the first and second orders correspond to opposite trading positions; (b) performing a first determination of whether a portion of the first order is to be matched against a portion of the second order; and (c) performing, after (b), a second determination of whether a portion of the first order is to be matched against a portion of the second order.
 8. The non-transitory computer readable medium of claim 7 storing computer-executable instructions for performing operations comprising: (a1) matching, after (a) and before (b), and against a first portion of the first order, a third order associated with a party other than the second party, wherein the first portion is less than all of the first order, and wherein a remaining portion of the first order remains after matching with the third order; (b1) matching, after (b) and before (c), less than all of the remaining portion of the first order against a portion of the second order, wherein a residual portion of the first order and a residual portion of the second order remain after the matching of less than all of the remaining portion of the first order against a portion of the second order; and (b2) matching, after (b1) and before (c), a fourth order against the residual portion of the first order or against the residual portion of the second order.
 9. The non-transitory computer readable medium of claim 8 storing computer-executable instructions for performing operations comprising: (c1) matching, after (c), a part of the first order against a part of the second order.
 10. The non-transitory computer readable medium of claim 9, wherein the request for cross order received in (a) comprises additional instructions, and storing computer-executable instructions for performing operations comprising: (c2) processing, in accordance with the additional instructions, a remainder of the first or second order remaining after (c1).
 11. The non-transitory computer readable medium of claim 10, wherein the additional instructions include at least one of fill and kill instructions or limit session instructions.
 12. The non-transitory computer readable medium of claim 7 storing computer-executable instructions for performing operations comprising: (a1) prompting, after (a) and before (b), for submissions of orders during a first pre-cross period by parties other than the first or second party; (d) receiving a second request for cross order, the second request for cross order comprising a third order and a fourth order, wherein the third and fourth orders correspond to opposite trading positions for a second financial product, and wherein the second financial product is different from the first financial product; (d1) prompting, after (d), for submissions of orders during a second pre-cross period by parties other than parties associated with the third and fourth orders, wherein the second pre-cross period is of different duration than the first pre-cross period; (e) performing, after (d1), a first determination of whether a portion of the third order is to be matched against a portion of the fourth order; and (f) performing, after (e), a second determination of whether a portion of the third order is to be matched against a portion of the fourth order.
 13. An apparatus comprising: a processor; and a computer-readable medium including computer-executable instructions that, when executed by the processor, cause the apparatus to (a) receive a request for cross order, the request for cross order comprising a first order associated with a first party and a second order associated with a second party, wherein the first and second orders correspond to opposite trading positions, (b) perform a first determination of whether a portion of the first order is to be matched against a portion of the second order, and (c) perform, after (b), a second determination of whether a portion of the first order is to be matched against a portion of the second order.
 14. The apparatus of claim 13, wherein the computer-executable instructions, when executed by the processor, cause the apparatus to (a1) match, after (a) and before (b), and against a first portion of the first order, a third order associated with a party other than the second party, wherein the first portion is less than all of the first order, and wherein a remaining portion of the first order remains after matching with the third order, (b1) match, after (b) and before (c), less than all of the remaining portion of the first order against a portion of the second order, wherein a residual portion of the first order and a residual portion of the second order remain after the matching of less than all of the remaining portion of the first order against a portion of the second order, and (b2) match, after (b1) and before (c), a fourth order against the residual portion of the first order or against the residual portion of the second order.
 15. The apparatus of claim 14, wherein the computer-executable instructions, when executed by the processor, cause the apparatus to (c1) match, after (c), a part of the first order against a part of the second order.
 16. The apparatus of claim 15, wherein the request for cross order received in (a) comprises additional instructions, wherein the computer-executable instructions, when executed by the processor, cause the apparatus to (c2) process, in accordance with the additional instructions, a remainder of the first or second order remaining after (c1).
 17. The apparatus of claim 16, wherein the additional instructions include at least one of fill and kill instructions or limit session instructions.
 18. The apparatus of claim 13, wherein the computer-executable instructions, when executed by the processor, cause the apparatus to (a1) prompt, after (a) and before (b), for submissions of orders during a first pre-cross period by parties other than the first or second party, (d) receive a second request for cross order, the second request for cross order comprising a third order and a fourth order, wherein the third and fourth orders correspond to opposite trading positions for a second financial product, and wherein the second financial product is different from the first financial product, (d1) prompt, after (d), for submissions of orders during a second pre-cross period by parties other than parties associated with the third and fourth orders, wherein the second pre-cross period is of different duration than the first pre-cross period, (e) perform, after (d1), a first determination of whether a portion of the third order is to be matched against a portion of the fourth order, and (f) perform, after (e), a second determination of whether a portion of the third order is to be matched against a portion of the fourth order. 